International Journal of Financial Management

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Are Stock Markets Interdependent? An Empirical Study of Selected Market Indices


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1 Centre for Management Studies, Dharmsinh Desai University, Nadia, Gujarat, India
     

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It has been acclaimed by various researchers that international diversification has reduced its charm as return-risk of the world markets are highly correlated due to information spillover effect and globalisation. This study examines inter linkages and interactions, if any, among the selected twelve indices of developed and emerging economies. The study applies descriptive statistics, correlation coefficients and Granger Causality test to check basic characteristics of each indices and their correlation and impact on each other. Granger Causality test for some indices shows that return of one market index had causal influence on return in other market index. The finding of this paper gives good insights to the international investors who are looking to reduce risk for a given level of return.

Keywords

Market Indices, Integration, Diversification.
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  • Are Stock Markets Interdependent? An Empirical Study of Selected Market Indices

Abstract Views: 361  |  PDF Views: 1

Authors

Falguni H. Pandya
Centre for Management Studies, Dharmsinh Desai University, Nadia, Gujarat, India

Abstract


It has been acclaimed by various researchers that international diversification has reduced its charm as return-risk of the world markets are highly correlated due to information spillover effect and globalisation. This study examines inter linkages and interactions, if any, among the selected twelve indices of developed and emerging economies. The study applies descriptive statistics, correlation coefficients and Granger Causality test to check basic characteristics of each indices and their correlation and impact on each other. Granger Causality test for some indices shows that return of one market index had causal influence on return in other market index. The finding of this paper gives good insights to the international investors who are looking to reduce risk for a given level of return.

Keywords


Market Indices, Integration, Diversification.

References